AfDB President Calls for More Financing for Small and Medium-Sized Enterprises in Africa

The African Development Bank (AfDB) Group President, Donald Kaberuka, has called for greater efforts to enable small and medium scale enterprises gain better access to financing. Mr. Kaberuka made the appeal on May 6, 2009, in Copenhagen, Denmark, during an Africa Commission meeting.

“Small and medium-sized businesses and entrepreneurs lack access to financing for investments and the economic crisis has just worsened the situation. That is why we want to establish the ’African Guarantee Facility’ with the aim of mobilizing loans for US$ 3 billion. This can open up for about US$20 billion in investments, equaling 1.5% of Africa’s GDP. It will be the most innovative initiative launched in Africa in decades, and we are convinced that it will create millions of productive and decent jobs,” said Mr. Kaberuka who is a member of the commission.

The meeting enabled commission members to deliver their final set of recommendations. The commission is proposing a new consensus for international development cooperation with Africa. It has called for greater focus on private sector-led growth, which creates jobs, especially for youths. The commission is also expected to launch five ambitious initiatives aimed at creating job opportunities for the continent’s youth: The initiatives include:

The creation of an African Guarantee Fund in partnership with the African Development Bank aimed mobilizing loans for three billion US$ and reducing the cost of access to finance for small and medium-sized enterprises, SME’s. Africa’s SME’s provide 80 percent of output and jobs in Africa;

Ensuring access to energy at the local level by launching a new initiative in partnership with the EU and the African Development Bank. More than three-quarters of Africans lack access to electricity – a major constraint to economic development, doing business and standards of living;

Improving the business climate and Africa’s competitive edge by making sure that the World Economic Forum’s Global Competitiveness Report covers all African countries. More than that, the Commission will work with a range of Africa-based entities to ensure that the findings of this benchmarking process is followed-up by the development of detailed policy responses and concrete reforms;

Unleashing the power of African entrepreneurship, both in start-up and existing enterprises, by providing advisory services and access to finance in order to allow young people to translate their good ideas into practical plans. The initiative will be implemented in partnership with the ILO and Youth Employment Network (a partnership between the UN, ILO and World Bank). It is expected that this initiative alone will create 40,000 new jobs and 20,000 new businesses;

Supporting higher education and research. Specifically, the initiative will increase the quantity and quality of artisans through apprenticeships, especially in the rural areas. Also, it will link tertiary research and business practices especially to expanding agricultural output.

“The Africa Commission’s report and recommendations fill out a vacuum. The lack of employment opportunities for the youth is one of the key challenges on the continent and is not reflected in the current international development focus. With the involvement of all the significant African stakeholders in the development of the report, the recommendations represent African solutions to African challenges. This is why I am very optimistic as regard to the prospect of living up to the high ambitions of the report; to create a whole new agenda for development policy in Africa,” Tanzanian President and member of the Africa Commission, Jakaya Kikwete, said during the meeting.

“With the report of the Africa Commission, we have outlined a clear path towards strengthening private sector-led growth, and we have already established strong and promising partnerships with key actors such as the African Development Bank, World Economic Forum, ILO, the World Bank and the African Union Commission. All of whom will support the realization of the five main initiatives. It is now that the work begins. All the members of the Commission have today committed themselves 100% to the recommendations and initiatives of the report. This demonstrates the genuine engagement we all feel towards creating more and better jobs for Africa’s youth,” the Danish Prime Minister, Lars Løkke Rasmussen, and Chairman of the Africa Commission, said.

To address significant challenges and new opportunities facing the continent, the Africa Commission recommends the development of a refocused agenda for international development cooperation with Africa. Creating jobs for Africa’s increasing youth population requires private sector-led growth through reforms which improve competitiveness. For this agenda to be successful, Africa will have to raise confidence in its economic prospects. African governments should focus more on attracting private capital for investment. They must assert ownership over necessary reforms and demonstrate good governance. Development partners should support the agenda and deliver on their aid commitments. Their assistance must support long-term development. Due to the demographic transition youth will comprise an increasing share of Africa’s growing population. This larger and younger working force constitutes a significant opportunity for Africa - but only if more jobs are created. If the political will can be mobilized, the energy and talent of Africa’s young women and men will be a force for positive change on the continent.